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Fencing with Piketty

As I sat down to read Thomas Piketty’s bestselling book, Capital in the Twenty-First Century, I must admit I was not well disposed toward the book. Here is a voluminous 700-page tome written by a Frenchman that has garnered scathing reviews from the conservative press and glowing praise from liberal economists. What can you expect from a book that calls for an 80-percent tax rate on those with “excessive income” and advocates global taxes? For those who defend the sovereignty of nations and free markets, it is a hard sell.

Naturally, based on what I had read, I expected to find in Piketty’s Capital a rabid, ideological screed in the line of Marx’s utterly unreadable Das Kapital. I expected a difficult read burdened by esoteric economic jargon impossible to decipher. It was to be one of those books that everyone says they have read and understand yet really don’t.

On the surface, I was surprised by the calm and even “moderate” tone of the book. True to his French background, I appreciated his power of definition, synthesis and logic. In layman’s terms, he lays out his arguments backed by extensive economic data, graphs and studies. He ties his premises together with clear, crisp summaries. As if to prove that economists also have souls, the author even cites literary examples from Jane Austin or Honoré de Balzac to illustrate his points. As I read, I felt as if I was fencing with the author, as I looked for openings in his logic to score a quick thrust with a shout of ”Touché!”

I believe this opening is found in the book’s central thesis, which he constantly repeats. This thesis is expressed by the formula that return on capital naturally tends to be greater than growth and will inevitably lead to an ever greater concentration of wealth. Piketty identifies this formula as r>g and holds it to be an inexorable law of economics that can be found throughout history. He admits that “it sums up the overall logic of my conclusions.”

The problem with this formula is not the debate over the questionable economic data he uses to back it up. Rather, it lies in the fact that Piketty considers this inexorable law to be intrinsically unjust in the egalitarian society he envisions. He sees the accumulation of capital in the form of interest, dividends, rents and inheritance as unjustifiable benefits that lead to unfair advantages over those who work. It will always lead to uneven accumulation, and therefore this unequal wealth must be leveled.

And that is the irony and danger of his work. His economic prescription for the world’s ills is one of a constant internal struggle against nature. As a premise, he establishes his formula as an almost immutable law of economics, yet advocates the ideological imperative of constantly negating this law through artificial means. Having established this false premise, the reader is asked to embrace the conclusion that the omnipotent state and even global governing structures are the sole levelers capable of holding in check the inexorable march of r>g.

But the real world has never corresponded to Piketty’s vision of society. The fact that people differ enormously in their abilities and talents has always given rise to unequal—and even extremely unequal—distribution of wealth in society. The family, being the basic social unit, naturally favors the accumulation of wealth and inheritance that represents its progress, not its ruin. Without accumulated capital and return on capital, real progress becomes impossible since grand endeavors need great resources to succeed. Finally, the state need not play the role of equalizer since excessive accumulation can be addressed by the natural regulating mechanisms found in family, community and Faith that normally serve to distribute wealth.

Indeed, Piketty’s real problem is capital itself and here we come to the point of shouting ”Touché!” Though careful in his attacks on accumulated capital, his true colors show through. He points to the excesses of capital, but attacks its essence; he claims to defend meritocracy yet actually promotes mediocrity. Piketty opens his flank when he makes no secret of the fact that he wants an egalitarian, postmodern society and sees the gradual suppression of accumulated wealth as a means to achieve this goal.

Throughout the pages of the French author’s heavy tome, one hears the distant echoes of Jean-Jacques Rousseau who denounced the initial formation of capital when he wrote: “The first person who, having fenced off a plot of ground, and took it into his head to say this is mine and found people simple enough to believe him was the true founder of civil society.” About this person who accumulated capital behind his fence, the philosopher raged:“What crimes, wars, murders, what miseries and horrors would the human race have been spared by someone who, uprooting the stakes or filling in the ditch, had shouted to his fellowmen: Beware of listening to this imposter: you are lost if you forget that the fruits belong to all and the earth to no one!”

Into the exposed opening of Piketty’s egalitarian rhetoric, I thrust my own arguments that capital does not exist in the abstract but is intimately linked with civil society. Take away the ability to accumulate wealth in its many forms and you destroy society’s stability and property’s foundation. Punish those who produce the nation’s wealth with huge progressive taxes and you suppress initiative. Level society with the strong arm of big government and you create not an egalitarian paradise but a wasteland.